Over 9.2 million workers across the U.S. will see their paychecks grow as the minimum wage rises in 21 states. The change — effective Jan. 1, 2025 — represents an overall pay increase of $5.7 billion per year, according to the Economic Policy Institute (EPI), a nonprofit think tank.
These increases are largely driven by state laws that adjust minimum wages for inflation, with 14 states automatically raising salaries based on the Consumer Price Index (CPI).
While the additional income – averaging about $420 annually — can help full-time, minimum wage-earning workers keep pace with rising living costs, experts argue that some states will need to revisit their minimum wage policies.
For example, Ohio’s minimum wage will rise slightly due to inflation, but the state hasn’t made a significant real wage increase since 2007. In fact, a full-time worker in Ohio would need at least $17.73 an hour to afford a modest standard of living, according to the EPI’s Family Budget Calculator.
In states where wage increases came through legislation or ballot measures, workers will see more substantial raises. For example, Delaware’s wage hike of $1.75 to $15 per hour can boost a worker’s annual earnings by $1,200.
The wage increases are particularly impactful for low-income and minority workers. Black and Hispanic workers make up a large share of those benefiting, many of whom are parents or live in households earnings below the poverty line, according to EPI.
Several states, including Illinois and Rhode Island, have also reached the $15 per hour minimum-wage mark. California and New Jersey are among those with higher-than-average increases, especially in sectors such as healthcare, according to a report from National Employment Law Project (NELP).
California’s recent increase to a $20 per hour minimum wage in some industries, such as fast food, has provided valuable data. Research from the University of California, Berkeley, shows that such wage hikes did not lead to the job losses or price increases often predicted, challenging the common belief that higher wages harm businesses.
However, not all states are following suit. The federal minimum wage has been stuck at $7.25 an hour since 2009. Right now, 20 states still have a minimum wage at or below that level, and a few states – like Alabama, Louisiana, Mississippi, Oklahoma, and Tennessee – haven’t set minimum wages at all.
While many local governments are leading the way with higher minimum wages, tipped workers still often earn less than the regular wage, the think tank notes. In states like California, Colorado, and Washington, localities are setting ambitious wage floors, with cities like Tukwila, Washington, reaching the highest minimum wage in the nation at $21.10 an hour in 2025.
These changes, along with annual adjustments in several states, show a growing movement to ensure wages reflect inflation and provide workers with a living wage, at least in certain parts of the U.S.
The push for higher wages comes alongside calls for more workplace improvements, including expanded parental leave.
The chart below highlights minimum wages in 2024 and 2025, including tipped wages, their most recent increases, and the factors driving these changes.